Industry

DOJ Sports Betting Opinion: Mainstream Media Spreads Misinformation; Sows Confusion

wire act reinterpretation doj

Spoiler alert: A formal opinion announced earlier this week by the U.S. Department of Justice does NOT ban all forms of online gambling.

If that conflicts with what you thought you read, it does.

U.S. News & World Report headline: “DOJ: All Online Gambling Is Illegal — Not Just Sports Betting”

Lead Paragraph: “A new legal opinion released by the Justice Department could further restrict online gambling, making it illegal in all forms.”

Fortune.com headline: “Justice Department Says All Online Gambling Is Illegal”

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Lead Paragraph: “The U.S. Justice Department now says that all internet gambling is illegal.”

Bloomberg headline: “U.S. Now Says All Online Gambling Illegal, Not Just Sports Bets.” Bloomberg has since altered its headline to more closely reflect reality, but some damage was already done.

Old lead paragraph (also since altered): “The U.S. Justice Department now says federal law bars all internet gambling, reversing its position from 2011 that only sports betting is prohibited under a law passed 50 years earlier.”

And then, of course there was the Washington Times op-ed written by former Nebraska AG and counsel to the Coalition of Stop Internet Gambling, Joe Bruning, who led with: “On Monday night, the Department of Justice (DOJ) restored the long-standing federal prohibition on all forms of Internet gambling.”

Laying out the “wrongs” in those headlines

Where to begin?

First off, bettors across the U.S. have been gambling online on horse races for many years, and no one thinks that The Wire Act – nor any interpretation – impacts them.

The Interstate Horse Racing Act of 1978 passed by Congress opened the door for simulcasting across the U.S. In 2006, the Unlawful Internet Gaming Enforcement Act (UIGEA) exempted horse race simulcasting from its limitations.

But if that was the only error this week, it wouldn’t be so bad. The real problem is with the confusion the headlines have created surrounding sports betting, online poker, other forms of online casino gaming, and state lotteries that utilize the internet.

I have yet to come across a gaming law expert who agrees with any of those headlines, and some find the Opinion virtually irrelevant. The consensus seems to be that intrastate online gambling in many forms is not impacted by the new Opinion, which doesn’t have the weight of Court decisions that seem to contradict the memo.

The gloomiest scenario notes that a literal interpretation of “interstate” could be stretched to include electronic servers and payment processing, which, if only momentarily, “cross state lines.” That could even be stretched further in a more extreme reach to include a state lottery ticket bought at a 7-Eleven.

But even that gloomy picture wouldn’t make the overbroad headlines accurate.

Still, make no mistake: headlines aside, the Opinion has legitimately caused concerns in the U.S. gambling industry.

The online poker compact among New Jersey, Nevada, and Delaware is one example, although there are conflicting opinions on the impact there. Powerball or MegaMillions sales online – is that at issue? What about payment processors like PayPal, which were hesitant to reenter the NJ online gambling market. Will they be spooked by the decision and pull out?

So how did this happen?

It’s notable that this news first leaked out after business hours on Monday night – yet the Coalition to Stop Internet Gambling put out a widely-distributed press release just an hour later that may explain a lot.

“CSIG is pleased to see today’s decision by the Department of Justice to reverse an Office of Legal Counsel opinion that was as problematic legally as it was morally.

“Today’s decision seamlessly aligns with the Department’s longstanding position that federal law prohibits all forms of internet gambling, as well as with Congress’s intent when it gave law enforcement additional tools to shut down the activity through the overwhelmingly-passed Unlawful Internet Gambling Enforcement Act in 2006.”

Note how the phrase “federal law prohibits all forms of internet gambling” meshes nicely with those headlines – many of which hit the Internet not long after that.

But a close reading of the Opinion includes this phrase: “Section 1084(a)’s first clause [in The Federal Wire Act of 1961] makes it a crime to use the wires ‘for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.’”
Note “interstate or foreign commerce.” Not intrastate.

Where do we go from here? The DOJ Opinion gives hints:

“Under our 2011 Opinion, the Department of Justice may not pursue non-sports-gambling-related prosecutions under the Wire Act. But under the conclusion we adopt today, such prosecutions may proceed where appropriate, and courts may entertain challenges to the government’s view of the statute’s scope in such proceedings. While the possibility of judicial review cannot substitute for the Department’s independent obligation to interpret and faithfully execute the law, that possibility does provide a one-way check on
the correctness of today’s opinion, which weighs in favor of our change in position….

“Moreover, if Congress finds it appropriate to protect those interests, it retains ultimate authority over the scope of the statute and may amend the statute at any time, either to broaden or narrow its prohibitions.”

In other words, maybe it’s time for the courts and/or Congress to step in and resolve these issues once and for all – something I concurred with in this week’s podcast.

Consider that all of this melodrama traces back to a federal bill signed into law by President John F. Kennedy.

DOJ got that part right. It’s time.

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